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As more work from home, demand for resort towns soar

More choose to live and work from the beach or mountains. Also, big-city rents continue to drop at a record pace and more homeowners are equity rich.

Lake Tahoe has always been a dream place to live. Now, with more companies allowing employees to work from home, that dream is becoming a reality — albeit a pricey one.

South Lake Tahoe home sales more than doubled (105.4%) for the second consecutive month in September compared to a year ago, according to the California Association of Realtors. And Rim O’ the World and Tahoe Sierra sales have soared 107.6% and 73.6% for the same comparable period, respectively. 

Other resort-type communities are also experiencing impressive price and sales gains in the state.

Santa Barbara County, with beachside communities and wine country in Santa Ynez Valley, had a 50% boost in sales in September from a year ago. Booming demand coupled with a dramatic 84% decline in listings from a year ago has increased home prices 37% to $1 million.

Monterey County — best-known for Carmel and, uh, Monterey — also enjoyed head-turning figures in September, with prices up 31% to $860,000 and sales surging 62%.

If the mountains are more your thing but Lake Tahoe is a bit too pricey or too touristy, Mariposa County may pique your curiosity. The county, just outside Yosemite National Park, is still affordable, at least compared to the rest of the state, but prices are soaring.

Mariposa County’s median home price is up 44% to $457,500 from a year ago. Those fast-rising prices are amazing, but even more incredible is the rocket-paced sales — up 53% during the past year. Of course, we are talking about a pint-sized county where fewer homes sell so any increase is exaggerated, but it’s rather impressive.

Feature photo of Zephyr Cove in Lake Tahoe. Doug Oglesby/Shutterstock

The average homeowner in California has $400,000 in equity. PBK-PG/Shutterstock

Are you (equity) rich?

Soaring home prices are greatly increasing home equity in California, making more owners “equity rich,” where the money owed on their mortgage is less than 50% of their estimated market value.

Being equity rich boosts consumer confidence and financial options, whether it’s focusing on eliminating the mortgage payment sooner or tapping into that equity to pay off an auto loan, high-interest credit-card debt or paying for home-remodeling projects.

Three of the cities with the highest percentage of equity-rich homeowners in the nation were in California during the third quarter, according to ATTOM Data Solutions. Almost two of every three (64%) homeowners in San Jose are equity rich, followed by San Francisco at 50% and Los Angeles at 44%.

The average homeowner in the state has about $400,000 in equity, more than double the average of $185,000 nationwide, according to CoreLogic. Bay Area homeowners boast the most equity, including about $1 million in San Francisco, and more than $800,000 in San Rafael and San Jose. Los Angeles-area homeowners have almost $500,000 in equity.  

“Homeowner equity in the third quarter added another pebble to the pile of markers showing that the U.S. housing market continues to defy the broad downturn in the economy this year,” says Todd Teta, chief product officer with ATTOM Data in Irvine. “Home prices kept rising, boosting the balance sheets of homeowners …”

‘Housing market still shaky as the coronavirus remains a threat’

There are a few areas of concern in the Golden State.

California — often the state with the largest percentage of equity-rich homeowners — fell to second place at 39.7%, behind Vermont at 45.1%. And California had the largest percentage-point decline of equity-rich homeowners compared to the second quarter at 43%.

Also, California easily had the largest increase of homeowners with seriously underwater homes in the U.S., from 2.6% in the second quarter to 3.7% in the third quarter. Seriously underwater homes are those where the mortgage is at least 25% more than the estimated current market value. About 5% of homeowners in El Centro have underwater mortgages, followed by Bakersfield at 4.8%, according to CoreLogic.

Certainly, the state’s underwater mortgage rate is far from the peak of 37% during the Great Recession and the subsequent housing market collapse, but any move is a bit of a worry, experts say. COVID and its lingering effect on the economy are hurting some homeowners in the state. 

Overall, underwater mortgages are more a minor concern than a sleepless toss-and-turn worry.

Percent of equity-rich homeowners in select metro areas
  • San Francisco-Oakland: 77%
  • Santa Clara: 62%
  • Los Angeles-Long Beach: 48.1%
  • San Diego: 37.9%
  • Sacramento-Roseville: 35.3% 
  • Riverside-San Bernardino: 31.5%
  • Redding: 25.8%
  • Fresno: 25.1%  

“With the foundation under the housing market still shaky as the coronavirus remains a threat, we will continue to monitor closely the various metrics, including equity,” says Todd Teta, chief product officer for ATTOM Data in Irvine. “But as it’s been throughout the pandemic, the market is strong and homeowners remain in a position to benefit.”

You can check your county by clicking on the interactive map:

San Francisco has endured the largest decline in rents in the U.S., helping renters but hurting landlords. Berti 123/Shutterstock

Big-city rents plunge, again

The big-city exodus for renters continued in November, as apartment rents plummeted in the Bay Area and Southern California.

Four of the 13 cities with record-setting rent declines were in California in November, led by a 20.7% drop in San Francisco. Across the Bay, Oakland had the second-largest decline in the nation at 19.7% compared to a year ago, according to industry tracker Zumper. 

San Jose (down 13.5%) and Los Angeles (off 13%) had the sixth- and seventh-largest drops, respectively. 

As more people work from home, they are abandoning higher-priced apartments in the Bay Area and Southern California in favor of more affordable housing in rural areas, such as Fresno and Sacramento. And some are learning that the $2,800-plus rent in San Francisco can be used for a mortgage in lower-priced inland regions or, in some cases, out of state.

Renters fleeing the big cities are causing demand and rents to increase in smaller markets, such as Sacramento and Fresno (see chart, below).

One-bedroom rent by city compared to a year ago
  • San Francisco: $2,800, down 20.7%
  • San Jose: $2,120, down 13.5%
  • Oakland: $2,020, down 19.2%
  • Los Angeles: $2,000, down 13.0%
  • Santa Ana: $1,640, up 1.2%
  • Anaheim: $1,620, down 2.4%
  • Long Beach: $1,570, up 1.3%
  • Sacramento: $1,450, up 11.5%
  • Fresno: $1,090, up 14.7%
  • Bakersfield: $830, up 7.8%

Los Angeles is one of the hardest-hit metro areas affected by COVID in the U.S. Daniil-Vnoutchkov/Unsplash

Which CA cities are the most affected by COVID?

COVID-19’s had a far-reaching effect in California, from business lockdowns to 2 million-plus residents still unemployed

But some California cities — and their residents — are far off worse than others, according to a recent WalletHub report. The consumer-oriented website crunched data to determine the most at-risk cities in the state based on nine key metrics — including average credit score, accounts in distress and bankruptcy filings.

Los Angeles, where blue-collar jobs are everywhere, finished at No. 7, while San Diego landed at No. 13. The cities finished among the top 20 because of two major factors — consumers searching online for debt and interest related to loans.

Certainly, that doesn’t mean consumers in those cities are in dire straits, but it does raise some worries, according to WalletHub. 

Only one other city in the state finished in the top 50, with Sacramento at No. 48. Tourist-dominated Las Vegas — easily the hardest-hit city by the pandemic — topped the national list, followed by Chicago and Houston.

Texas has five of the top 10 spots on the list, with San Antonio and Dallas at Nos. 4 and 5, respectively.

Ron Trujillo

Longtime business journalist-turned-public relations executive who enjoys reporting on residential real estate in his spare time. He can be reached at ron@calhomenews.com.

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